How digital connects CNC businesses in the age of the pandemic
Submitted by Orderfox
Traditional CNC business models and organizations are currently under threat. The COVID-19 outbreak has made it clear just how vulnerable the complex, global manufacturing supply chains are.
The crisis is further complicated by the CNC industries’ reliance on critical on-time deliveries. Deliveries delayed by just one day can cause gaps to appear throughout the supply chain, and this can lead to complete standstills, huge drops in sales and increases in cost.
Since the outbreak, business for many companies has been delayed or halted, international trade fairs have been cancelled and tens of thousands of workers worldwide are at home in isolation. Earlier sales forecasts have suddenly become obsolete and needless to say, the financial consequences of the pandemic will be severe.
There isn't (yet) a reliable and comprehensive solution for the collapsed global economy. Still, we’re not entirely powerless. Each company can still soften the impact of their losses. The crisis may be constricting many production sites, however there still seems to be a high demand for components.
The crisis calls for improving CNC supply chain management
COVID-19 has been a wake-up call for many CNC businesses, demanding them to improve their disaster management strategies and supply chain management.
Wilfried Sihn, Professor for Industrial Engineering and Systems Planning at the Institute for Management Sciences at the Vienna University of Technology says: “Corona has shown us that our supply chains are unstable and that the paths we had taken in the past are dangerous.”
In the course of globalization, many companies have mainly focused on low prices and have often been relying on a single sourcing strategy. This has now become a big issue because those supply chains are breaking down. Due to closed borders and production stoppages, supply from those single sources cannot be guaranteed anymore.
“In science, we are discussing a new concept: Glocalization. This is referring to the combination of globalization and local sourcing. It is important not to lose sight of local sourcing and therewith a better guarantee for supply” says Sihn.
In the aftermath of the pandemic, businesses may consider relocating their manufacturing elsewhere, and thus, labour costs might not be the biggest factor when choosing the manufacturing location.
“We see what impact it has when the transport and production routes are cut off. And we also see the importance of production in our own country or in Europe. The coronavirus will affect the global situation. I therefore assume that many production steps will return to Europe.
Companies will consider whether they will continue to outsource everything in the future or whether it is better to source in the immediate vicinity at a minimally higher price,” says Oliver Lödl, CSO of Orderfox.com.
How digitalization brings opportunities for CNC manufacturers
Many CNC manufacturers are small and medium sized businesses, relying on traditional sourcing and quoting techniques, which are time-consuming and soon becoming outdated. In many cases these manufacturers rely heavily (to an extent of more than 80%) on just one regular business partner, whilst only 20% of their revenue is generated by newly acquired customers (Source: Orderfox Customer Research). So, new acquisition channels are needed.
Digitalization will transform CNC sourcing
It is not easy to find alternative business partners in the CNC industry to fill in the gaps. Many of them can’t be “googled” because they don’t have an internet presence. For the time being, industry fairs, which for many years have been a reliable source for business networking, have been cancelled.
In the absence of our familiar places to connect and find new leads, digital tools can finally fulfil their potential. Online platforms can make establishing new customer connections a breeze, be it on a local or global level. With the new online tools on the market today, CNC manufacturers and buyers can find each other easily, with a click of a button.
Digital platforms are a helpful solution as they offer new market opportunities whilst providing additional transparency. Orderfox is the only global platform that believes in the necessity of a direct relationship between buyer and manufacturer. Whereas other platforms hide the manufacturer information and supplier sourcing happens in a “black box”, Orderfox allows for a direct communication between the two parties, which provides maximum transparency and mutual trust. At the same time, the price pressure on manufacturers is alleviated.
An example of how increases in capacity can be utilized “After the crisis, when the machines are started up again, when we have to compensate for the needs of the difficult past months, online sourcing tools will be crucial. Because even in normal times, newly purchased machines are only at 70 - 80% capacity, but Orderfox can fill the remaining percentages to 100%”, says Oliver Lödl, CSO at Orderfox AG.
Online platforms to find new CNC suppliers
A digital platform can significantly increase efficiency and save a lot of research effort for CNC buyers. With the help of digital tools, delivery delays can be reduced and at the same time multi sourcing allows for risk diversification.
Oliver Lödl: “There are many small, highly professional companies that you can hardly find because they invest little in market presence and marketing. This tedious research is already done by Orderfox. On the platform, you can also see at a glance which components can be produced by certain companies, in which tolerance classes they can do it, which machines they use and where they manufacture.”
Orderfox is opening up their CNC platform free of charge for the entire industry until April 30, 2020. You can find out more here.
Orderfox is the world's leading digital marketplace for the CNC industry. We want to enhance the success of our business partners and revolutionize the way they work together. CNC machining businesses can rely on our extensive network for custom manufacturing through qualified shops across the globe. Get our CNC platform free of charge for the entire industry until April 30, 2020.